Nice impressions, but I have a few minor corrections to your post.
1. The 32MB MS Duo that comes in the value pack is great - if all you're going to do is save games. I used mine for my initial game saves and testing out the MP3 playback, then got a 512MB. 32MB is too small for movies or music, but more than enough for a ton of game saves. (Heck, it's 4 times bigger than a standard PS2 memory card, and the PSP game saves - on average - are smaller than the save files for PS2 games.)
2. The game you liked was Lumines (only one "e"), and it's a work of genius. It's from the same guy who did Rez on the DC and PS2. He's got one called Meteos coming out for the DS and that one looks great too.
3. You can't just get online and game right out of the box. No games support direct connections over the internet yet, so the guy must've been using Xlink Kai or some other tunneling program.
Despite what some people might think, the market is plenty big enough for both the DS and the PSP. I'm looking forward to the "battle" anyways, as I hope it'll motivate developers to push both systems as far as they can.